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Manitoba Finance Minister Rosann Wowchuk tabled the province's first deficit budget in more than a decade on Tuesday. ((James Turner/CBC))

Manitoba's NDP government said it will slow the pace of previously promised tax cuts, borrow heavily from its so-called "rainy day" fund and slash some department budgets in an effort to slay a massive projected deficit.

In its 2010 budget tabled on Tuesday, the government also said it plans to change its balanced budget law in order to run deficits amounting to $1.4 billion over four years.

It's the first time in more than a decade the province has forecasted a deficit.

Finance Minister Rosann Wowchuk said the government proposes to spend more than $10.7 billion on core provincial services this year but will only take in a little more than $10.2 billion in revenue.

As one belt-tightening measure, one half of existing government departments will see their budgets decrease this year as the province diverts that money to "priority areas" such as health, education and training, family services and justice, Wowchuk said.

A full 60 per cent of total new spending will be directed toward health care. Smaller portfolios such as Conservation and Water Stewardship are likely to be affected by the cuts.

As well, amendments to provincial balanced-budget legislation is necessary to allow deficit-fighting plans to work over the next five years, Wowchuk said.

This year, the province plans to pay $96 million toward the deficit, Wowchuk said. Some $600 million from the province's $804-million rainy-day fund will be used to pay down the deficit.

There are no plans in the works to sell Crown assets.

"There will be $200 million left in the rainy-day fund," Wowchuk said. "I'm telling you we have a plan and we don't want to cut services, we don't want to raise taxes, we don't want to sell Crown corporations," she said.

Progressive Conservative Leader Hugh McFadyen was critical of the government's budget measures, calling the deficit a "sinkhole" that will likely result in it being paid off through eventual tax and fee hikes or service cuts.

McFadyen said he was anticipating a shortfall, but the provincial projections are much worse than he expected.

"We will pay the price for this debt and for these deficits for many years to come," he said.

Winnipeg Mayor Sam Katz reacted to the budget by saying he hopes the province's strategy pays off. This year, the city will receive about a five per cent increase in funding from the province for a total of $218 million.

"There must be a program in place where they believe there's going to be surpluses to cover this," Katz said. "If they have that plan, fine. If they don't, then you're asking for trouble."

Select tax increases, delays in cuts

The province said as of midnight Tuesday, the tobacco tax will increase by 50 cents for a pack of 25 cigarettes, raising a projected $18 million in increased tobacco revenue over the year.

People who use tanning salons will now have to pay PST on the service as of July 1. Previously, it had been exempted.

As well, there will be delays in extending Manitobans previously announced tax cuts, the government said. People expecting cuts to the Education Property Tax Credit, the corporate income tax rate and personal income tax will have to wait a little longer, according to Wowchuk.

The provincial net debt has climbed to nearly $14 billion, according to budget documents. The province said each person in the province would have to pay $11,339 to pay it off in full.

Salaries frozen

Wowchuk announced a 20 per cent cut to the pay cabinet ministers get on top of their salaries as MLAs. Each minister can expect to see a cut in the range of $9,000.

As well, MLA salaries have been officially frozen.

The government will attempt to negotiate a two-year wage freeze with nurses and other public-sector employees in coming months as collective agreements expire.

"There may have to be some adjustments made to their budget along the way," said Peter Olfert, president of the Manitoba Government and General Employees Union.

"We'll be negotiating, as always, for improvements in some areas."

Transfer payments from the federal government remained flat at just over $3 billion, but Wowchuk said she doesn't expect any cuts to the major provincial revenue source over the coming years — despite Ottawa battling a large deficit of its own.

"The federal government said they would not balance their budget on the backs of provinces ... I don't anticipate a decline in those payments," she said.

Other highlights

Post-secondary students will likely pay more as the province has allowed universities and colleges to raise tuition by a maximum of five per cent. It is also boosting operating funds for post-secondary schools by 4.5 per cent.

Nine additional Crown prosecutors will be hired in the next year, a move Wowchuk said should help deal with perceived delays in the justice system.

There is also money to pay for a few new police officers in Winnipeg and Brandon.

As expected, the province has committed to fund the operating costs of a helicopter for the Winnipeg Police Service, and will pay for part of a new police cadet program announced on Monday.

Over the next five years, the government plans to add "hundreds" of new child-care spaces and 1,500 new social housing spots.

Four new water-bomber aircraft will be purchased to fight forest fires in northern and remote parts of the province.

Some fees the government charges for services are rising, including the cost of filing civil lawsuits and divorce petitions in court.

With file from The Canadian Press